DTN Early Word Livestock Comments

Cattle: Steady Futures: Mixed Live Equiv: $246.90 +4.82*

Hogs: Steady Futures: Mixed Lean Equiv: $125.59 -1.23**

* based on formula estimating live cattle equivalent of gross packer revenue.

(The Live Cattle Equiv. Index has been updated to depict recent changes in live cattle weights and grading percentages.)

** based on formula estimating lean hog equivalent of gross packer revenue

GENERAL COMMENTS:

Cattle futures could do nothing but slide lower as traders were disappointed with limited trading so far this week. There were reports of some cattle traded in Nebraska $2.00 to $3.00 higher, but it was not a solid representation of the overall market. Packers and feedlots remain at a standoff with continued surging boxed beef prices increasing the resolve of feedlots to hold for higher prices. Packers see huge profits, but anticipate the days are numbered for surging boxed beef prices. However, even if boxed beef prices decline, their profits will continue to remain large as a result of the dramatic increase over the past few weeks. Tuesday, boxed beef prices jumped with choice cuts up %8.26 and select cuts up $3.22. Yet, packers are still not stepping up to the plate and raise bids. One would think some cash business would be done Wednesday, but with the Cattle on Feed report being released on Friday, cash trading may be erratic and possibly late.

Hogs were finally able to see some strength in the cash market with the National Direct Afternoon report increasing $2.64. However, cutouts were down again with a declined of $1.23. Futures established an inside trading day with October potentially heading to close the lower price gap before being able to move higher. The large discount of October to cash does not seem to have much influence as there are two months before they need to converge and there is a lot that can happen in that time.

	BULL SIDE		BEAR SIDE
1)	Limited cash activity and surging boxed beef should push packers to increase bids to obtain the supplies they need.	1)	Cattle futures have not been able to break out of the sideways trading pattern that they have been in since June. The inability of prices to move higher even though boxed beef has increased dramatically, does not bode well.
2)	Feedlots may hold out for higher prices through the Cattle on Feed report in hopes that it will show tighter supplies, which could mean higher prices as the futures market suggests.	2)	Even if cash cattle trade higher this week, it may not be enough to push futures higher due to the premium already contained in deferred contracts.
3)	October hogs continue to hold a large discount to cash, which could move the market higher if demand improves and cutouts trend higher.	3)	Pork cutouts still do not seem to have found a bottom, leaving traders guessing and support elusive.
4)	The anticipation of tighten hog supplies remains, which is keeping some underlying support in the market.	4)	Packers continue to be able to find sufficient hogs to keep processing in line with demand. This has limited their aggressiveness in the cash market.

**

For our next livestock update, please visit our Midday Livestock comments between 11 a.m. and noon CDT. Also, stay tuned to our Quick Takes throughout the day for periodic updates on the futures markets.

Robin Schmahl can be reached at rschmahl@agdairy.com

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